Armenian business community hopes that new government will significantly improve Tax Code considering economy development interests

ArmInfo. Armenian business  community hopes that the new government will significantly improve  the Tax Code developed by the government and adopted by first reading  in parliament. They also hope that the bill will be adopted not just  because the time is an issue and because it is one of the terms of  allocating another tranche from IMF to reduce budget deficit.  

Representatives of small and medium business and American Chamber of  Commerce in Armenia (AmCham) touched upon these issues at the  discussion of the new Tax Code. It was noted that active work on  drafting the Code has been conducted in Armenia since last year.   Various organizations, representing businessmen's interests and  expert community sent to the governmental agencies hundreds of  recommendations for improvement of the document, numerous  consultations were held aimed at developing common concept of the  document. However, according to the common opinion of the discussion  participants the document adopted by the parliament at first reading  is weak, unbalanced and does not meet demands of country's  development. 

President of AmCham, famous economist Tigran Jrbashyan voiced the  organization's recommendations on tax reforms and proposed so called  concept "21", based on unification and facilitation of the rates of  the main taxes on the level of 21%-on VAT and income tax. Profit tax  rate should be 10% plus 11% on dividends. At the same time in order  to increase internal capital investments profit directed to  development of companies should not be taxed. AmCham also proposes  not to tax income lower than minimum consumer basket as well as to  withdraw government's proposal of graduated taxation between 1-2 mln  drams, as in fact it will lead to shadow employment in IT and  financial sectors.

According to experts' calculations increasing VAT rate by 1%-21% will  raise budget incomes by 20-21 bln drams y-o-y and will compensate  possible losses from reducing income tax rate to 21%.

Touching upon development of such sectors as mortgage lending, health  insurance and education Jrbashyan proposed to pay special attention  on expanding and raising efficiency of so called credit  system-reciprocal payment of income tax and VAT, their recalculation  and establishment of maximum threshold of accounting, and the credit  system should not work higher than the established threshold to avoid  financial fraud. The expert proposed to lay VAT on healthcare and  educational services introducing system of tax credits, these funds  will be returned to population.  

The expert proposed to gradually raise cadastral value of property to  its market value as well as introduce penalty charges for unfinished  construction of industrial facilities. These measures will help to  return a huge number of non-used industrial areas into economic  turnover. It is also proposed to increase tax rates on property for  the buildings, cadastral value of which exceeds 300 mln drams while  the information about the owners of property amounted to higher than  150 mln drams should become available for society. 

AmCham experts paid special attention to the issues of protection of  investments including the foreign ones, predictability and stability  of investment climate. For this reason any amendments in legislation  should come into force in one year after their adoption, which will  allow economic entities to adapt to new rules of the game. In case of  large investments (1 bln drams) special tax regime should be  determined within 5 years if desired by investor, during which any  legislative changes will not affect the investor. 

In a talk to ArmInfo's correspondent Tigran Jrbashyan expressed hope  that the new government will succeed to postpone final adoption of  the Tax Code until the main social economic essence of the document  is defined based on "happy medium" between the implementation of  efficient fiscal function by the state and development tasks of  country's economy.